The UK trade deficit - does it matter?

Back in the 1980s people obsessed over the UK’s trade deficit, but now it barely warrants a mention. Eoin Gleeson asks if they are right to be this sanguine.

What is a trade deficit?

A trade deficit occurs when a country is importing more goods than it exports. It reflects the fact that a country is living beyond its means spending more on foreign imports than it makes from selling its own exports abroad. To give an idea of the scale of a trade deficit, the figure is typically compared to the country's Gross Domestic Product (GDP) the total value of goods and services produced in a country in a year. Britain's trade deficit was £60bn in 2006, or 5% of GDP.

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Eoin came to MoneyWeek in 2006 having graduated with a MLitt in economics from Trinity College, Dublin. He taught economic history for two years at Trinity, while researching a thesis on how herd behaviour destroys financial markets.